Dems seek edge on payroll tax

Democrats gunning for another year-end fight over the payroll tax cut say an extension isn’t just good economics — it’s also good politics.

Though a wide swath of their party loathes the nearly two-year old payroll tax cut — and even President Barack Obama has proposed ending it — many Democratic lawmakers, particularly in the House, are pressing their colleagues to keep the multibillion-dollar provision alive in the wide-ranging tangle of fiscal cliff negotiations awaiting Congress after the election.

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A confluence of economic and strategic factors is at play. For one, leading Democrats pushing for an extension argue that a still-recovering economy may not be able to absorb the kind of blow that would result from cutting off the payroll tax holiday after Dec. 31. Allowing the break to lapse would shrink paychecks by 2 percentage points in January.

“If we’re going to be talking about these kinds of tax relief measures, we should focus on the one that helps 160 million Americans and would provide an economic boost,” Rep. Chris Van Hollen (D-Md.) told POLITICO.

But Democrats also say that the very act of fighting for an extension will provide their party a political boost in fiscal cliff talks, particularly since Republicans will be focused on the separate issue of extending the Bush-era upper-income tax rates.

“The contrast is very clear,” Van Hollen said. “This is the right policy to consider, and I think it’s also a useful message.”

Rep. Joe Crowley (D-N.Y.), who is also open to a payroll tax-cut extension, said pushing for an extension could make clear the difference between the GOP and Democrats when it comes to tax policy.

“Our perspective is, the Republicans have been talking consistently about giving the wealthiest a tax cut and I think what this does in reality, it is giving the middle class a tax cut,” said Crowley, a member of the tax-writing Ways and Means Committee. “So I think it shows the Democratic Caucus has been toward the middle class as opposed to the wealthiest.”

The payroll tax cut primarily benefits lower- and middle-income taxpayers because it is applied to only the first $110,000 of income.

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CORRECTION: Corrected by: Kourtney Geers @ 11/01/2012 12:47 PM
CORRECTION: A previous version of this story misquoted Amy Brundage. She says the very first thing Congress should do is extend middle-class tax cuts.